23 rd India Fellowship Seminar Ageing population Importance

  • Slides: 17
Download presentation
23 rd India Fellowship Seminar Ageing population: Importance of long term health care product

23 rd India Fellowship Seminar Ageing population: Importance of long term health care product and issues in pricing Guide: Aditya Vardhan Tibrewala K T Jayasager Banashree Satpathy Sachin Madan 18 th June, 2015 Mumbai Indian Actuarial Profession Serving the Cause of Public Interest

Agenda • Ageing Population • Importance of Long Term Care Products • Issues in

Agenda • Ageing Population • Importance of Long Term Care Products • Issues in pricing Long Term Care Products www. actuariesindia. org 2

Ageing Population www. actuariesindia. org 3

Ageing Population www. actuariesindia. org 3

Ageing – Wiki’s Take • Process of becoming older • Accumulation of changes -

Ageing – Wiki’s Take • Process of becoming older • Accumulation of changes - Physical, psychological and social • Reflects cultural and societal conventions • Largest known risk factor for most human diseases • Population ageing - phenomenon that occurs when the median age of a country or region rises due to rising life expectancy and/or declining birth rates. www. actuariesindia. org 4

Population Ageing - A Concern For India? • • Developing countries ageing faster. Population

Population Ageing - A Concern For India? • • Developing countries ageing faster. Population aged 60 years and above in India is expected to increase to 20% by 2050 35 years into the future! Ø Working population would reduce substantially Ø Increase in the need of old age health care benefits Ø Dependency on State for age related benefits would increase www. actuariesindia. org 5

Care For Elderly In India – Current Scenario • Large working population • A

Care For Elderly In India – Current Scenario • Large working population • A small proportion of wealthy individuals self provide for their old age • General expectation that Children will take care of parents • Joint family systems prevalent • Government providing means tested benefits e. g. RSBY, Indira Gandhi National Old Age Pension Scheme • NGOs working for the rights of the elderly www. actuariesindia. org 6

Importance of Long Term Health Care Products www. actuariesindia. org 7

Importance of Long Term Health Care Products www. actuariesindia. org 7

Importance of Long Term Health Care Products Ageing and Longevity • Acceleration in population

Importance of Long Term Health Care Products Ageing and Longevity • Acceleration in population ageing • Increase in longevity Changing Family structure • Increasing trend of nuclear families and reduction in informal care • Willingness of Children to take care of old parents decreasing Support from the State • Lack of state initiatives • Benefits provided by the State not enough Cost • Increasing cost of care • Medical inflation higher than general inflation Others • Aspiration to be independent at old age • Savings oriented culture www. actuariesindia. org 8

Issues in Pricing of Long Term Health Care Products www. actuariesindia. org 9

Issues in Pricing of Long Term Health Care Products www. actuariesindia. org 9

Issues in Pricing – Design & Assumptions (1) • Type of product- lack of

Issues in Pricing – Design & Assumptions (1) • Type of product- lack of market study to decide on pre-funded or immediate care • Key product feature - Indemnity or fixed benefit? • Morbidity – Incidence rates – Termination rates – Lack of data difficulty in setting morbidity assumptions • Total claim costs – Inflation and its impact on care cost – Huge variation in medical cost between providers • Longevity and its impact on premium www. actuariesindia. org 10

Issues in Pricing – Design & Assumptions (2) • • • Voluntary termination (lapse)

Issues in Pricing – Design & Assumptions (2) • • • Voluntary termination (lapse) – Influenced by economic scenario, customer attitude etc. – Dynamic – Selection impact Expense assumption – Impacted by wage and medical inflation. – Depends on the medical service providers. Tax rates – Depends on fiscal outlook of Government – Prone to changes in a growing economy Investment return – Long term nature of investment decision – nature & term of assets – reinvestments Mix of business Change over time - How to allow for rapidly changing experience without impacting affordability of the product? www. actuariesindia. org 11

Issues in Pricing – Modeling • • Cost and time involved in developing model

Issues in Pricing – Modeling • • Cost and time involved in developing model Level of complexity in the model Availability of expertise Risk of over simplification Spurious accuracy Outputs – might be impractical to implement Sensitivities to be tested for – Model points – Assumptions www. actuariesindia. org 12

Issues in Pricing - Profitability • Uncertainty in − Parameter estimation − Claims cost

Issues in Pricing - Profitability • Uncertainty in − Parameter estimation − Claims cost • Low volumes − Affordability of premiums − People unaware of the need − New type of products in Indian context • Capital requirements high • Regulatory constraints www. actuariesindia. org 13

Issues in Pricing – Distribution & Other Factors • • • Lack of customer

Issues in Pricing – Distribution & Other Factors • • • Lack of customer and distributor understanding More scope of Mis-selling Expensive products making sales difficult Training requirements higher than other Insurance products Underwriting requirements higher than other Insurance products • Special Claims handling required www. actuariesindia. org 14

Long term care products – next steps • • • Partnership with Government Focus

Long term care products – next steps • • • Partnership with Government Focus on penetration Micro insurance plans – in similar lines to RSBY Restricted benefit for affordable premium Process efficiency – Underwriting and Claims – Minimum hassle to policyholder in policy and claims servicing Help from partner (in case of Joint Venture) Reinsurance arrangements Risk pooling arrangements Indemnity benefits do not look like a possibility for a few years to come Only low level of guarantees possible www. actuariesindia. org 15

“Wrinkles should merely indicate where the smiles have been. ” - Mark Twain

“Wrinkles should merely indicate where the smiles have been. ” - Mark Twain

Any Questions? www. actuariesindia. org 17

Any Questions? www. actuariesindia. org 17